Australian poverty in graphs: it's a desperate state of affairs

Extract from The Guardian

Fair Go?

Welfare in Australia

Greg Jericho

Inequality data may suggest an improvement but the reality is life is still brutally hard for those in the bottom 10%

@GrogsGamut

Tue 16 Apr 2019 03.55 AEST Last modified on Tue 16 Apr 2019 11.36 AEST

‘Poverty too often is excluded from discussion, even when we talk of fairness and equality.’ Photograph: Jenny Evans/AAP

Too often the political and economic debate in this country treats inequality and poverty as synonymous, rather than realising most of the inequality discussion has its eyes set on the middle.
Think “working Australians”, “middle Australia”, the “average household”, and reports on interest rate changes that are written with an assumption that most people either have a mortgage or one day will. We talk of wages growth with the assumption that the growth is more important than the actual size of the wages. We debate electric vehicles assuming buying a car is something most of us can afford to do.
We look at things such as the Gini coefficient and talk about inequality without noting that inequality is often about gaps around the middle rather than those at the bottom.
The latest inequality figures from the ABS suggest things have improved somewhat since the GFC, although it remains worse than it was 20 years ago.

But while inequality measurements are important they can hide the reality that for those in the bottom 10% life remains as brutally hard as ever. The richest might see their income fall because of falling asset prices but that does little to alleviate life in poverty even if it might suggest equality has improved.
The political debate also frequently sets the position of poverty as one of blame – that it is people’s own fault for being poor. Much like casual racism there is a casual prejudice against poverty.

Just this week the prime minister, Scott Morrison, suggested, “The harder you work, the better you do, good for you. I do not understand what the point would be of working hard under a Labor government. I really do not know. Why would you bother? Because the better you do, the harder you work, the more you put in, the more Bill Shorten puts his hand in your pocket.”

That line intrinsically suggests that wealth is something deserved, due not through luck of birth or connections but just hard work. The harder you work, the more you earn – and thus if you do not earn enough, clearly you are not working hard enough.
And yet the Australian Council of Social Service (Acoss) estimates 38% of those living below the poverty line are in work and 15% of all people who work part-time are in poverty.
So how do we measure poverty, and what are we really talking about?
The standard definition is that the poverty line is a household on 50% of the median household income. But, as with all measurements of household income, this means we have to take into account the number of people in that household.
In 2016 for a single person that meant existing on an annual income of less than $22,383 – or $430.44 a week. For a family of four it meant a household income of less than $47,004 or $903.93 a week – and put them very much within the poorest 10% in the country:

A broader definition sometimes used by economists (and the OECD) is to set the poverty line at 60% of median household income.

At this level a couple with one person working on the minimum wage would be in poverty, and so too would a family of two with one adult earning the average adult income:

But as Acoss correctly points out in its Poverty in Australia report for 2018, just talking of after-tax income rather makes things appear rosier than they really are.
While housing costs may not be a tax, they must be paid if we wish to keep a roof over our heads. So, when talking of disposable income we really need to consider housing costs, which Acoss calculates takes the poverty line down to $353 a week:

$353 a week to spend on food, transport, heating, insurance, clothes and medical expenses. Consider that the ABS estimates the average single person in the bottom 20% spends around $144 a week on food and beverages. Add, say, $50 a week for public transport, and you really are not needing an electricity or heating bill to arrive in the mail.

And it is here we should note that the weekly rate of Newstart is just $277.85.
Newstart has never been enough to keep someone out of poverty but the gap between Newstart and the poverty line is now as large as ever.
Newstart only increases in line with the consumer price index and thus in real terms it never increases. But households on welfare payments such as DSP and Newstart spend a higher percentage of their money on housing costs than do others, and less on recreation and travel. That is why when the ABS measures cost of living it takes into account the different spending patterns of households dependent upon the source of their income:

And when we use this cost of living index to measure the changes in Newstart, we find that it is now worth 3.5% less in real terms than it was 20 years ago, while in the same period average male full-time earnings has risen 28%:

And because the poverty line is measured against the median household income it means that the level of Newstart is now also much further below the poverty line than it was 20 years ago:

However, a major indicator of poverty is not just income source but age.
Acoss estimates that 24% of those living in poverty are under 15 – some 620,000 children – compared with that age bracket accounting for just 19% of all Australians:

But the poverty rate is much higher for those in retirement than for other ages. And here Australia does very poorly compared with other advanced nations. While the average poverty rate for those over 65 in OECD nations is 11.4%, in Australia it is 19.5%, and rises to 28.7% for those over 75:

This puts Australia as one of the worst among all OECD nations for elderly poverty:

But on this aspect the traditional measure of poverty can be misleading – because it does not take into account home ownership. The Grattan Institute has recently argued that if you consider housing ownership as part of disposable income (what is known as imputed rent) this reduces the level of poverty among elderly Australians to around 9%.
This measure would still see Australia near the top of the OECD for retiree poverty, but nowhere near the levels seen in the US and Mexico.
It also highlights how crucial house ownership is to Australia’s retirement system. And why the declining ownership and numbers of those with mortgages paid off before retiring is a tidal wave of worry for policymakers.
A comparison with the OECD nations also shows that our tax and transfer system is not as effective as is others. Prior to the redistribution of taxes and transfers we have the 11^th lowest rate of poverty; after taxes and transfers, however, we fall to 19^th:

Age has also been found to be a great determiner of how long you will stay in poverty.

The University of Melbourne’s 2016 Household, Income and Labour Dynamics in Australia survey found that half of all single elderly males in poverty will be so for more than a year, compared with less than a third for their younger counterparts:

The ABS has recently published a measure of household “advantage and disadvantage” which considers things such as internet connection, car ownership, education level, number of bedrooms in a house, number of parents, and the skill level of occupations.

It found that not only do levels of disadvantage vary across states, they are also affected by age, with elderly people much more likely to be found in the bottom 25%:

But in Australia there is one other factor which greatly determines your level of disadvantage and poverty – whether or not you are Indigenous.
The ABS found that nearly half of all Indigenous people in Australia are in the bottom 25% of advantage, compared with just 17% for non-Indigenous people:

Measures of poverty may show that in general the level of poverty in Australia has declined slightly across the past 20 years, but it remains a desperate state of affairs that too often is excluded from discussion, even when we talk of fairness and equality.


Reporting in this series is supported by VivCourt through the Guardian Civic Journalism Trust